Armed with the knowledge that the Commission was likely to follow the staff recommendation, Jim Johnson, CEO of Lusk Co., withdrew the proposal before the Commission voted on it. Johnson was unavailable for comment to GlobeSt.com.

Reasons cited for the Commission's resolution to deny the permit included nonconformity with numerous sections of the Coastal Act and that such nonconformity "will prejudice the ability of the local government having jurisdiction over the area to prepare a Local Coastal Program…" In addition to the scale of the project, the Commission also objects to the filling and grading of some canyons and the impact that would have on the local wetlands and the buffers to those wetlands."Approval of the permit would not comply with the California Environmental Quality Act because there are feasible mitigation measures or alternatives that would substantially lessen the significant adverse impacts of the development on the environment," the resolution continues. Those alternatives include lessening the scale of the development to 112 acres of flat land that is outside the canyon areas and alternative bluff stabilization measures.

The denial has sent the City of San Clemente and the developer back to the drawing board. The city had been looking at the development as a source of much needed property tax revenue after a statewide initiative severely limited its abilities to continue collecting property tax levies, thereby threatening the city's financial health, published reports say. In response to that initiative the city has cut its staff by 55% and eliminated many sports programs.

Project opponent, G. Wayne Eggleston, now a city councilman, had written in his campaign literature in 1998, "San Clemente deserves better for this last piece of coastal development in our town." In addition to the housing and commercial development, the proposal had included acquisition and dedication of beachfront property, a $1-million contribution to enhancement of the downtown business district, a $7.2-million contribution to the city for off-site circulation improvements, proposals for protecting and enhancing local habitat, and additional infrastructure including six bridges to protect the wetlands, utilities and a flood control system.